Non-Disclosure Agreements (“NDAs”) are a staple in the business world, providing protection for confidential information and ensuring sensitive data stays secure. NDAs aim to keep information safe from falling into the wrong hands, whether you are an employee, contractor, or business partner. However, while these agreements serve a critical purpose, they also come with their own set of challenges. Let’s dive into some of the key pain points people face with NDAs and explore how these challenges can affect both individuals and businesses.
Overly Broad or Vague Language
One of the most common pain points with NDAs is the language used within them. Many NDAs are written in overly broad or vague terms, leaving room for interpretation and confusion. A typical clause might state that any and all information obtained from or about a party must remain “confidential” without specifying what falls under that category. This can be problematic because it often leads to ambiguity about what information is actually protected. For example, is general knowledge or publicly available information included?
This vagueness doesn’t just create confusion – it can also lead to unintended violations of the agreement. Individuals might unknowingly share information that they didn’t recognize as confidential, exposing them to potential legal consequences.
Beyond simply defining “Confidential Information” you don’t want other defined terms in your NDA to be too broad. If your defined terms are over-expansive, you could unintentionally end up including people, information or obligations under the NDA that are not commercially reasonable. Make sure terms like “Affiliates” and “Representatives” are refined enough to not include people too far removed from the potential deal.
Duration and Life After an NDA
Another potential issue with NDAs is the duration of their terms. Some NDAs can last for an unreasonably long period, sometimes even indefinitely. For example, an NDA might require you to keep information confidential for the next 20 years or longer – sometimes even after you’ve moved on from the company or organization.
A never-ending or excessively long NDA can restrict your ability to freely apply the knowledge you’ve gained in future endeavors, even when that information is no longer relevant or sensitive. Time-bound restrictions often feel like an unnecessary burden, especially when the information covered by the NDA loses its value over time.
Related to the duration of an NDA, it is important to consider what happens to confidential information at the end of the NDA’s life. Depending on the language of the NDA, parties can have a duty to return or destroy confidential information. If the NDA stipulates a deadline by which the information must be returned or destroyed, you need to consider the manpower required to track those deadlines and keep the required information collated.
Impact on Creativity and Innovation
While NDAs are often essential for protecting intellectual property, they can also have an unintended impact on creativity and innovation. In industries that thrive on collaboration and idea-sharing – like tech or entertainment – individuals or businesses may feel hesitant to contribute or share their thoughts fully out of fear that they might breach an NDA.
That is why it is very important to consider explicitly protecting your mental impressions in your NDA. Additionally, it is important to consider the protections that should apply to intellectual property created during an NDA’s lifetime. Both considerations are essential sticking points when balancing the protective nature of the NDA with the importance of continued innovation.
Restrictions on Competition
Non-compete, non-circumvention, and non-solicit clauses in an NDA can have a substantial impact on employees and companies alike. Non-compete clauses can prevent an employee or company from engaging in “competitive” behavior with the counterparty of the NDA. Competitive behavior can look different depending on who’s behavior is being restricted: employees can be prevented from working for a competitor or starting a similar business, while a company can be prevent from engaging in the same or similar industry. While these clauses can help protect one company’s interests, it may also reduce opportunities for employees and other companies to explore new roles or innovative ventures.
Non-circumvention clauses can prevent one party from bypassing the other to engage directly with third parties, like key contacts. For companies, this means fewer chances to engage with valuable partners, potentially slowing growth and innovation. For employees, it may restrict their ability to connect with others in the industry, limiting professional development and future business opportunities.
Similarly, non-solicit clauses prevent a party from soliciting employees, customers, or clients of another party. For companies, this means they may have a harder time maintaining or expanding their client base, while employees face limitations on their ability to pursue new opportunities or leverage their industry connections. While all three clauses are intended to protect proprietary information, they can also create barriers that reduce flexibility for both businesses and employees, potentially stifling innovation and competition in the market.
Conclusion
NDAs are necessary for protecting sensitive information, but they’re not without their challenges. From vague terms to restrictive durations, these agreements can create significant pain points for individuals and companies, causing anxiety before business gets started. But you don’t need to shoulder that anxiety alone – let the RR&A team help you navigate the NDA waters for smooth sailing.
The RR&A team can help you fully understand the terms of your NDA and ensure that your NDAs are fair, transparent, and reasonable in order to foster a healthy, collaborative working environment. By addressing the pain points of NDAs, we can create agreements that protect everyone’s interests without causing unnecessary frustration or limiting professional growth. Reach out to RR&A today to see how we can help!
Katie is a Junior Associate at R. Reese & Associates and part of the Commercial Contracts, Land and Title, and Corporate Teams. To learn more about Katie, visit her attorney page.
Disclaimer: The information and material on this website is general information about our practice and firm. This information does not offer specific legal advice and the use of this information does not create an attorney-client relationship with RR&A or any of its attorneys. The information on this website should not be used for legal advice, and persons should not act upon the information on this website without engaging professional legal counsel.
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